Update: Explosion at Kleen Power Plant, Middletown, Connecticut: A massive explosion on February 7 at an under-construction power plant in Middletown, Connecticut, badly damaged the structure and killed five people. Fire officials said the blast occurred during testing at the Kleen Energy Systems facility, which was 95 percent complete and due to come online in the summer as the largest electricity generating plant in the New England region. Reports said the project is covered for property damage and business interruption (BI) losses in a policy shared by several insurers.
US Property Catastrophe Market January 2010 Renewals: The US property catastrophe reinsurance renewal at January 2010 demonstrated a measurable decline in pricing overall compared with the renewal at 2009. Analysis of the complete January 2010 renewal dataset indicates the US catastrophe RoL index retreated by an average of 10 percent, allowing for the impact of the major prior adjustments to the catastrophe models. A reduction in the ratio of signed to authorized lines from 94 percent to 85 percent is a further sign that capacity is up and a more competitive market has emerged.
Property Retrocession Renewals: The property retrocession market renewal customarily closes late and the 2010 season was no exception. Buyers generally prefer to wait to ensure that they have the best possible view of their own inwards portfolio exposures before proceeding to purchase. A late, speedy renewal is possible because of a number of factors including uniformity of required data; the relatively small size of the market; a quick execution period and a reduced number of buyers coming to market at this time of the year.
Rates Retreat as Capital Rebounds: Global Reinsurance Renewals at January 1, 2010: Reinsurance rates for most lines of business decreased at the January 1, 2010 renewal. The Guy Carpenter World Catastrophe Rate on Line (ROL) Index decreased by 6 percent in response to a swift and substantial recovery in the capitalization of the reinsurance sector. The combination of the rally in investment markets, much reduced catastrophe loss activity and recessionary effects on demand resulted in an excess of supply and increased competition. This was reflected in a slow renewal in which many contracts closed very late in the season as buyers sought to gain maximum advantage. The overall movements in pricing have also occurred against a complicated background of exposure adjustments, model revisions, program changes and other market noise.
Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of Enterprise Risk Management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.
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2009 Catastrophe Update: Other Significant Events of 2009: In 2009, there were frequent reminders of the risks posed by earthquakes, and it was Asia again that suffered the most when two massive earthquakes struck Indonesia and the Samoa region in the space of a day. The most deadly earthquake of the year hit southern Sumatra in Indonesia on September 30, killing more than 1,100 people. The earthquake, measuring 7.6Mw, left around 500,000 people homeless after 250,000 homes were damaged, half of them completely destroyed.